What's The Best Way To Obtain A Business Line Of Credit?

Question

I am looking to obtain a line of credit for my REI business. I have received some very attractive offers from companies like Discover who offered me (not my business) $25,000 at 0% APR for 12 months. I personally have excellent, well-established credit. However, I am looking for something like the above offer for my business, which has no credit history at all. How does a lender go about approving a business? Do they run a credit report of the principal owner/member/shareholder? Does anyone have any recommendations on how to proceed?

Steve Babiak · Answer

One of the banks I work with, TD Bank, offered a business credit card.   How did it work?  Basically, my own TD Bank credit card limit would be lowered by whatever credit limit I chose to award the business; so essentially, I am only good for so much credit overall with them, and I can split it any way I want, and I didn't go any farther than that but I assume I would have had to personally guarantee whatever the business credit limit became.

There are a few threads on BP on how to build business credit:

http://www.biggerpockets.com/forums/12/topics/37432-building-business-credit

http://www.biggerpockets.com/forums/109/topics/42559-business-credit-for-new-llc-

http://www.biggerpockets.com/forums/94/topics/275-getting-a-loan-for-an-llc-and-building-corporate-credit

http://www.biggerpockets.com/forums/94/topics/56607-has-anyone-ever-found-a-legitimate-business-credit-company-in-the-state-of-nevada

http://www.biggerpockets.com/forums/12/topics/8571-want-to-buy-my-first-property-under-business-credit

http://www.biggerpockets.com/forums/79/topics/46689-thomas-kish-business-credit-coaching

http://www.biggerpockets.com/forums/110/topics/28198-building-business-credit-make-sense-

http://www.biggerpockets.com/forums/94/topics/34292-building-business-credit-help

http://www.biggerpockets.com/forums/94/topics/45529-business-credit-d-and-b-questions

http://www.biggerpockets.com/forums/94/topics/49256-establishing-business-credit

http://www.biggerpockets.com/forums/94/topics/17238-get-business-credit-part-1

http://www.biggerpockets.com/forums/94/topics/15256-d-amp-b-duns-worth-it-

http://www.biggerpockets.com/forums/94/topics/15663-anyone-used-paydex-in-there-new-business-

http://www.biggerpockets.com/forums/94/topics/10833-corporate-credit

http://www.biggerpockets.com/forums/110/topics/28198-building-business-credit-make-sense-

http://www.biggerpockets.com/forums/94/topics/68892-building-both-personal-and-business-credit-at-the-same-time

http://www.biggerpockets.com/forums/94/topics/63293-secured-business-cc-for-building-business-credit-

http://www.biggerpockets.com/forums/94/topics/59798-how-do-you-build-corp-credit-

http://www.biggerpockets.com/forums/109/topics/70257-building-credit-w-d-and-b

http://www.biggerpockets.com/forums/94/topics/62468-d-b-warning

http://www.biggerpockets.com/forums/94/topics/45529-business-credit-d-and-b-questions

http://www.biggerpockets.com/forums/94/topics/38174-build-buiness-line-of-credits-and-authorized-users

Jay Hinrichs · Answer

Account Closed

are you looking for a true line of credit or just a business CC..?

If your looking for a true LOC then your best bet is to start at all your small community banks create banking relationships with them then start small and work your way up.

Of course you can't complain about 0% interest, however I assume that's a teaser and if you run a balance on the card after month 12 you will pay interest.

I have 2 true unsecured LOC's  one I got with WAMU before they got bought my Chase.. I figured chase would call it but they never did.. And its tied to prime so the rate is very low. And if there is a balance on it you have to pay principal and interest. Not sure if it reports to my personal credit.  but PG is required .. My other unsecured LOC is with my community bank and I think I started 20 years ago with 50k  its now substantially higher. but still unsecured and I know this one is not reported to credit.. 1 over prime with a floor of 5%  interest only renews each year.. this facility gives one maximum flexibility when shopping for deals.. you just call the bank they transfer right then and there to your personal or bizz account and away you go.

Account Closed · Answer

@Chris Sweeney,

Just give the bank a personal guarantee and see whether they will give you a line of credit. Most banks been burnt before buy people setting up LLC getting credit with no personal guarantee and closed up shop and run around the corner and start over and that is the reason they want a personal guarantee. Please don't listen to the Gurus who say you can get a million dollars line of credit with no personal.

Joe Gore

Ann Bellamy · Answer

Steve Babiak, you are the king of compiling links on a topic, thank you!

Robert Anderson · Answer

Mike - that's probably due to the in the Credit Card Accountability Responsibility and Disclosure (CARD) Act. This law may have helped consumers but it gave entrepreneurs a raw deal.

my advice...do NOT get a biz CC, obtain a new personal one. here's why...

With a biz CC You are now 100% liable for fraudulent purchases with no cap (unlimited liability), subject to sudden and sharp interest rate increases, retroactive rate increases, shorter billing cycles, they can pierce the corporate veil to come after your personal assets if you miss payments.

I don't see why you would want one at all, unless a good DUNS score requires revolving credit. In that case, I would open one with a small credit limit ($500) and never use it except to buy some gum twice a year to keep it active.

Tracey Williams · Answer

Neil, the credit card from the banks doesn't show up on the D&N. I have two cards on my business from two different banks. I asked the bank & the answer I got is that they do not report it. I did have to personally guarantee the cards but they do not show up on my credit either.
Tracey

Account Closed · Answer

Thanks for all the helpful information everybody!

Mike H. · Answer

Be very careful with the business credit cards and where they report to. I had a Capital One card for my business that was reporting to my business only. And then about 2 years ago, it suddenly showed up on my personal credit.

They told me that had changed their policies and were now
reporting the business card on personal credit.

I then paid it off and haven't used it since. The rates aren't as good as my personal so why bother with the card if its going to report to my credit just the same.

Neil Goradia · Answer

I have the exact same questions. I went to a few seminars where they talked about it but I didn't feel like paying the big bucks for the "software" or service they were offering to get my business LOC set up.

Here is what I learned though. You can apply for a D&B (Duns and Bradstreet) number, which helps businesses develop credibility with suppliers. It isn't required, but I've heard it will go a long way to developing your business credit. In general, I've heard scores are based out of 100, and if you are even 1 week late it gets docked 10 points. I believe good credit is supposedly around an 80. The key is to establish accounts with your LLC at places that don't require a personal guarantee, such as Wal-Mart, Staples, Home Depot, etc. We have had an account with Lowes  for a long time but found out they did require it to be contingent on our personal credit, so try to avoid them. Once those merchant accounts start reporting your business in good standing, you should be able to show banks that you have good credit.

We got lucky and when we created a business account at PNC bank about 3 years ago, they went ahead and pre-approved us for a 10k credit card in the company name. We've had it in good standing ever since, and I believe that means we have good credit. But I don't even know how I would check the score. Perhaps my next step is to just approach our bank for a LOC.

Good luck,
Neil

What's The Best Way To Obtain A Business Line Of Credit?

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